Sealed Air Reports First Quarter 2014 Results

• Adjusted EBITDA Increased 8.9% to $252 Million or 13.8% of Net Sales
• 2014 Adjusted EPS of $0.33 Increased 43%; Reported EPS of $0.33

ELMWOOD PARK, N.J.--(BUSINESS WIRE)--Apr. 30, 2014-- Sealed Air Corporation (NYSE: SEE) today announced financial results for the first quarter 2014. Commenting on these results, Jerome A. Peribere, President and Chief Executive Officer, said, “First quarter 2014 net sales of $1.8 billion increased 2.8% on a constant dollar basis compared to last year primarily due to favorable price/mix of 3.4%. We delivered favorable product price/mix across all divisions and all regions, which contributed to a year-over-year improvement of 160 basis points in gross profit margin. We also increased Adjusted EBITDA margin by 110 basis points to 13.8% as compared to 12.7% in the previous year.”

“We have made tremendous progress engaging our customers on our value-added solutions and how we ‘Re-imagine™ the industries they serve.’ We will continue to focus on improving our product mix and delivering the most innovative solutions to the marketplace. Our first quarter performance is a true testament to our strong market leadership position and commitment to improving the quality of earnings. We are on track to achieve the high-end of the range we previously provided for full year Adjusted EBITDA of $1.050 billion to $1.070 billion. We are also increasing our Free Cash Flow outlook to approximately $425 million,” Peribere continued.

All results presented in this release include results on a continuing operations basis and reflect the change in the Company’s segment structure as previously disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission on April 16, 2014. The Rigid Medical Packaging business, which the Company sold in December 2013, has been presented as discontinued operations. Reported information is defined as U.S. GAAP. Year-over-year net sales discussions present both reported and constant dollar performance. Constant dollar sales performance excludes the impact of currency translation. Additionally, non-U.S. GAAP adjusted financial measures, such as Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization (“Adjusted EBITDA”), Adjusted Net Earnings, Adjusted Diluted Earnings Per Share (“Adjusted EPS”) and Tax Rate, exclude the impact of special items, such as restructuring charges, cash-settled stock appreciation rights (“SARs”) granted as part of the Diversey acquisition and certain other one-time items.

Business and Financial Highlights

• Net sales in the Food Care division of $904 million were unchanged compared to last year. On a constant dollar basis, Food Care net sales increased by 3.9% primarily due to favorable price/mix of 4.1%, partially offset by a slight decline in volume. Adjusted EBITDA increased 9.5% to $160 million or 17.6% of net sales. This compares to Adjusted EBITDA in the first quarter 2013 of $146 million or 16.1% of net sales. The 150 basis point improvement in Adjusted EBITDA margin was due to favorable mix and price/cost spread as well as cost synergies, partially offset by non-material inflation and negative currency translation.
• The Diversey Care division reported net sales of $505 million, a 1.5% decline compared to last year. On a constant dollar basis, net sales increased 1.2% with favorable price/mix of 3.2% partially offset by a 2.0% decline in volume. Adjusted EBITDA increased 4.5% to $45 million or 8.8% of net sales. This compares to Adjusted EBITDA in the first quarter 2013 of $43 million or 8.3% of net sales. The 50 basis point improvement was primarily attributable to a more favorable customer mix, improved pricing trends and cost synergies, partially offset by lower volumes, non-material inflation and negative currency translation.
• The Product Care division reported net sales of $394 million, a 1.7% increase compared to last year. On a constant dollar basis, net sales increased by 2.6% primarily due a favorable price/mix of 2.1% and a slight increase in volume. Adjusted EBITDA increased 12.0% to $70 million or 17.8% of net sales. This compares to Adjusted EBITDA in the first quarter 2013 of $63 million or 16.2% of net sales. The 160 basis point improvement was largely attributable to favorable mix and price/cost spread as well as cost synergies.

First Quarter 2014 Summary

First quarter 2014 net sales of $1.8 billion were unchanged on a reported basis compared with first quarter 2013. On a constant dollar basis, net sales increased 2.8%. The Company delivered constant dollar sales growth in all regions, except Europe which declined 1.6%. Latin America increased 9.9%, AMAT¹ increased 7.2%, North America increased 3.5% and JANZ² increased 1.3%. Additionally, first quarter 2014 reported net sales from Developing Regions³ increased 7.9% in constant dollars, accounting for 25.0% of total net sales. Favorable product price/mix of 3.4% was slightly offset by a 0.6% decline in volume.

Adjusted EBITDA for the first quarter 2014 increased 8.9% to $252 million, or 13.8% of net sales. This compares to first quarter 2013 of $231 million, or 12.7% of net sales. The 110 basis point improvement in Adjusted EBITDA margin in the first quarter 2014 was primarily attributable to a more favorable mix and price/cost spread and cost synergies, partially offset by non-material inflation, lower volumes and $8 million negative currency translation.

Reported first quarter 2014 net earnings were $72 million, or $0.33 per share, which included special items largely comprised of foreign currency exchange losses related to Venezuelan subsidiaries and costs associated with previously announced restructuring programs, offset by a gain on the W. R. Grace & Co. Settlement agreement, which primarily consisted of the release of certain tax and other liabilities. This compares to reported net earnings of $1 million in the same period a year ago. Adjusted Net Earnings were $71 million or $0.33 per share in the first quarter 2014. This compares to Adjusted Net Earnings of $50 million, or $0.23 per share in the first quarter 2013. The tax rate in the first quarter 2014 was 21.4% as compared with 18.3% in the first quarter 2013.

Cash Flow and Net Debt

As previously disclosed, on February 3, 2014, the Company funded the W. R. Grace & Co. Settlement and related accrued interest with $555 million of accumulated cash and cash equivalents and $375 million from committed credit facilities, contributing to the net cash used in operating activities of $938 million in the three months ended March 31, 2014. Excluding the payment of the Settlement agreement, cash used by operating activities was $8 million, which is net of $27 million of restructuring and $14 million of SARs payments. This compares with cash used in operating activities of $38 million in the three months ended March 31, 2013, which is net of $24 million of restructuring and $17 million of SARs payments. Capital expenditures were $28 million for the three months ended March 31, 2014 and $26 million for the three months ended March 31, 2013.

Free Cash Flow, defined as net cash used in operating activities less capital expenditures, was a use of $966 million in the three months ended March 31, 2014. Excluding the Settlement agreement payment, Free Cash Flow was a use of $36 million, compared with a use of $63 million during the same period a year ago. Compared to December 31, 2013, the Company’s net debt increased $61 million to $4.4 billion as of March 31, 2014. This increase was a result of net cash used for working capital items, including seasonal inventory growth, certain annual incentive compensation payments and higher interest payments.

Outlook for Full Year 2014

The Company reaffirmed previously provided outlook for net sales and Adjusted EPS. Net sales are expected to be approximately $7.7 billion or relatively flat compared to 2013 with organic growth offset by rationalization and an estimated unfavorable impact of more than 2% from foreign currency translation. Adjusted EPS is expected to be in the range of $1.50 to $1.60 as compared with 2013 Adjusted EPS of $1.39. The Company is increasing its expected Tax Rate to approximately 27% from the previously provided estimate of approximately 25% for the full year 2014.

The outlook for Adjusted EBITDA is estimated to be at the high-end of the previously provided range of $1.050 billion to $1.070 billion as compared with 2013 Adjusted EBITDA of $1.038 billion. The Company is increasing its Free Cash Flow outlook to approximately $425 million from the previously provided outlook of $410 million. The forecast for capital expenditures and cash restructuring charges remain unchanged at approximately $170 million for capital expenditures and approximately $150 million for restructuring. The Company’s Free Cash Flow target excludes the Settlement payment.

Business

Sealed Air Corporation creates a world that feels, tastes and works better. In 2013, the Company generated revenue of approximately $7.7 billion by helping our customers achieve their sustainability goals in the face of today’s biggest social and environmental challenges. Our portfolio of widely recognized brands, including Cryovac® brand food packaging solutions, Bubble Wrap® brand cushioning and Diversey™ cleaning and hygiene solutions, ensures a safer and less wasteful food supply chain, protects valuable goods shipped around the world, and improves health through clean environments. Sealed Air has approximately 25,000 employees who serve customers in 175 countries. To learn more, visit www.sealedair.com.

Website Information

We routinely post important information for investors on our website, www.sealedair.com, in the "Investor Relations" section. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Non-U.S. GAAP Information

In this press release and supplement, we have included several non-U.S. GAAP financial measures, including Adjusted Net Earnings and EPS, net sales on a "constant dollar" basis, Adjusted Gross Profit, Adjusted Operating Profit, Free Cash Flow, EBITDA, Adjusted EBITDA and tax rate. We present results and guidance, adjusted to exclude the effects of certain specified items (“special items”) and their related tax impact that would otherwise be included under U.S. GAAP, to aid in comparisons with other periods or prior guidance. We may use Adjusted EPS, net sales on a constant dollar basis, Adjusted Net Earnings, Adjusted Gross Profit, Adjusted Operating Profit, measures of free cash flow, net debt, and EBITDA figures to determine performance-based compensation. Our management uses financial measures excluding the effects of foreign currency translation in evaluating operating performance. Management believes that this information may be useful to investors. For a reconciliation of these non-U.S. GAAP metrics to U.S. GAAP and other important information on our use of non-U.S. GAAP financial measures, see the attached supplementary information entitled “Non-U.S. GAAP Free Cash Flow,” “Reconciliation of U.S. GAAP Condensed Consolidated Statements of Operations to Non-U.S. GAAP Adjusted Condensed Consolidated Statements of Operations and Non-U.S. GAAP Adjusted EBITDA,” “Segment Information,” and “Components of Change in Net Sales by Segment.”

Forward-Looking Statements

This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by such words as “anticipates,” “believes,” “plan,” “assumes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans to,” “will” and similar expressions. These statements reflect our beliefs and expectations as to future events and trends affecting our business, our consolidated financial position and our results of operations. Examples of these forward-looking statements include expectations regarding our anticipated effective income tax rate, the potential cash tax benefits associated with the W. R. Grace & Co. Settlement agreement (as defined in the Company’s Annual Report on Form 10-K), potential volume, revenue and operating growth for future periods, expectations and assumptions associated with our restructuring programs, availability and pricing of raw materials, success of our growth initiatives, economic conditions, and the success of pricing actions. A variety of factors may cause actual results to differ materially from these expectations, including domestic and international economic and political conditions, changes in our raw material and energy costs, credit ratings, the success of restructuring plans, currency translation and devaluation effects, the competitive environment, the effects of animal and food-related health issues, environmental matters, and regulatory actions and legal matters. For more extensive information, see “Risk Factors” and “Cautionary Notice Regarding Forward-Looking Statements,” which appear in our most recent Annual Report on Form 10-K, as filed with the Securities and Exchange Commission, and as revised and updated by our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, whether as a result of new information, future events, or otherwise.

¹ AMAT is comprised of Asia, Middle East, Africa and Turkey.
² JANZ is comprised of Japan, Australia and New Zealand.
³ Developing Regions are Africa, Asia (excluding Japan and South Korea), Central and Eastern Europe, and Latin America.

Source: Sealed Air Corporation

Sealed Air Corporation
Investor Contact:
Lori Chaitman, 201-703-4161
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Media Contact:
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